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SBP Launching Foreign Exchange Trading Platform

SBP Launching Foreign Exchange Trading Platform

The State Bank of Pakistan (SBP) is set to launch a Centralized Foreign Exchange (FX) Trading Platform named ‘FX Matching’ for the interbank FX market. This initiative aligns with Vision 2028, focusing on creating an innovative and inclusive digital financial ecosystem. The primary goal is to offer interbank market participants a centralized trading platform with anonymous FX trading and real-time price visibility.

The adoption of the FX Matching platform represents a crucial stride toward enhancing the depth and transparency of the interbank FX market. The platform aims to provide a level playing field for market participants, ensuring fair and efficient trading practices.

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To formalize the introduction of interbank FX trading on the FX Matching platform, the SBP has issued instructions for Authorized Dealers (ADs), who are key participants in the interbank market.

Key Features of FX Matching:

1. Availability to Participants:
– FX Matching will be accessible to all ADs (participants) for interbank USD-PKR trading in the spot market.
– Trading on the platform will occur anonymously, allowing participants to place or hit quotes without revealing their identities.
– Counterparties will be disclosed only after a trade is matched.

2. Price Visibility:
– Best bid and offer prices quoted on FX Matching will be visible to all participants.
– Best executable quote for a participant is subject to counterparty limit availability.

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3. Credit Limits:
– Participants can set credit limits for their counterparties on the FX Matching platform.
– Having credit limits with major market participants is advised to secure the best available quotes.

4. Trading Parameters:
– Minimum lot size for trading on FX Matching is $500,000, and multiples thereof.
– Bid or offer prices on the platform will be firm and valid until canceled by the quoting participant.

5. Trading Timings:
– Participants can trade on FX Matching during the interbank FX trading hours specified by SBP.

6. Order Cancellation:
– Participants are recommended to cancel all open orders before logging off from the platform or the market’s closing for interbank FX trading.

Interbank FX Trading on FX Matching and FXT Dealing:
– Starting January 29, 2024, ADs are mandated to use FX Matching or FXT Dealing for executing outright interbank FX transactions affecting Foreign Exchange Exposure Limits.
– FX Swap transactions with the same counterparty will follow current practices, including FXT Dealing, telephone, or other means.
– Trading on FX Matching will be conducted for Tom value if the Federal Reserve Bank of New York is closed while the interbank FX market is open in Pakistan.

Reporting of Deals:
– All deals executed on FX Matching and FXT Dealing must be reported electronically to SBP in real time.
– Timely confirmation by both counterparties is essential to ensure accurate and real-time reporting.
– Existing end-of-day reporting through the Foreign Exchange Computerized Reporting System (FXCRS) will continue as per current instructions.

In embracing the FX Matching platform, the SBP aims to foster a transparent, efficient, and technologically advanced interbank FX market. The platform’s features and guidelines underscore the commitment to fair and secure trading practices, contributing to the overall stability and growth of Pakistan’s financial landscape.